IGSCE Business Studies Flash Cards

Business Activity

The process of producing goods and services to satisfy the wants and needs of customers

Scarcity

Not enough goods and services to meet wants of the population

Opportunity Cost

Benefit that could have been gained from an alternative use of the same resource

Factors of Production

Land, Labour, Capital, Enterprise

Specialization

People and business concentrate on what they are best at

Division of Labour

Splitting the production process into separate tasks, with each employee completing only 1 task

Consumer Goods

Goods sold to the public, tangible

Capital Goods

Tangible Goods sold to other businesses that will be used in further production of goods and services

Added Value

Adding value in the production process

Primary Sector

Extraction of raw materials

Secondary Sector

Processing of raw materials to manufacture finished goods

Tertiary Sector

Provides a service to final customers

Mixed Economy

Economy controlled by public and private sectors

Entrepreneur

Innovative, risk-taking, self-motivated individual

Business Plan

Detailed document outlining business aims

SME

Small/Medium Enterprise with under 250 employees

Market Share

Share of total market value

Motivation

Factors influencing employee behavior towards business goals

Maslow's Hierarchy of Needs

Self-actualization, esteem, social, safety, physical

Scientific Management Theory

Aims to reduce inefficiency in tasks

Financial Rewards

Cash and non-cash incentives given to employees to boost their motivation and efforts.

Hourly Wage Rate

Payment based on a fixed amount per hour worked, commonly used for production and non-managerial staff.

Salary

Fixed annual payment for certain staff grades, not tied to hours worked or output, often for supervisors and managers.

Piece Rate

Payment based on the number of units produced, motivating employees to increase productivity.

Bonus Scheme

Additional rewards for meeting set targets, encouraging higher performance and productivity.

Fringe Benefits

Non-cash rewards like health insurance or pensions to attract and retain employees.

Profit Sharing

Additional payment based on business profits, linking employee motivation to company performance.

Commission

Payment to sales staff based on the value of items sold, motivating higher sales.

Job Rotation, Enlargement, Enrichment

Methods to redesign jobs for increased interest, variety, and skill development.

Organizational Structure

The formal framework showing how a business is managed and organized.

Chain of Command

The route through which authority is passed down in an organization.

Span of Control

The number of subordinates reporting to a manager, affecting communication and supervision.

Tall/Flat Organizational Structures

Tall has many hierarchy levels, while flat has fewer, impacting decision-making speed.

Delegation

Passing authority down the hierarchy, improving time management and employee development.

Leadership Styles

Autocratic, Democratic, Laissez-Faire, each with different decision-making and supervision approaches.

Trade Unions

Organizations aiming to improve pay and working conditions, negotiate with employers, and provide legal support for members.

Unions

Organizations that can enforce high pay standards on employers, potentially increasing business costs and reducing competitiveness and profitability.

Industrial Action

Actions like strikes that can disrupt production, lead to loss of orders, and ultimately reduce profitability.

Internal Recruitment

Filling job vacancies with existing employees of the business, aiming to benefit from their familiarity with the business operations and to promote employee motivation.

External Recruitment

Filling job vacancies with individuals not currently employed by the business, often done to bring in new ideas and a wider range of skills and experiences.

Job Description

A document outlining key details about a job, including title, duties, responsibilities, and accountability, typically prepared by the HR department with input from the relevant manager.

Person Specification

A list of qualifications, skills, experience, and personal qualities sought in a successful job applicant.

Training

Programs designed to enhance employee skills, productivity, and motivation, leading to improved efficiency, decision-making, and customer service.

Induction Training

Training to familiarize new recruits with the workplace, colleagues, procedures, and their roles, either on or off the job.

Downsizing

Reducing the size of the workforce due to reasons like falling demand, automation, or relocation, often involving selecting employees for redundancy based on criteria like productivity and absenteeism.

Termination of Employment

Various reasons for ending an employee's tenure, including resignation, retirement, redundancy, and dismissal, each with its specific circumstances and implications.

Video Conferencing

Advantages include reducing travel costs and saving time, while disadvantages involve issues with time zones, connectivity, and equipment costs.

Communication Barriers

Various types include problems with the channel of communication, using the wrong medium, complex language, excessive information in one message, and lack of trust/respect.

Disadvantages of Communication Barriers

Include incorrect/incomplete tasks leading to waste and decreased productivity, damaged reputation, low employee morale, high accident risk, poor sales, and recruitment issues.

Market Research

Involves collecting, recording, and analyzing data about customers, competitors, and the market to identify trends, customer needs, and market size.

Marketing Mix

Consists of Product, Price, Promotion, and Place decisions that impact the marketing of a product, with Product focusing on goods and services satisfying customer needs.

Product Life Cycle

Describes the stages a product goes through, including Introduction, Growth, Maturity, and Decline, each with specific characteristics and marketing strategies.

Price Elasticity of Demand

Measurement of how demand for a product changes in response to a change in its price.

Pricing Methods

Strategies like Market Skimming, Penetration Pricing, Competitive Pricing, and Price Leadership used to set prices for products.

Channel of Distribution

Path taken by a product from the producer to the final customer, involving direct selling, retailers, wholesalers, and middlemen.

Promotion

Marketing activities aimed at informing and persuading customers to buy products, including advertising, personal selling, direct mail, and sponsorship.

Marketing Strategy

Plan combining the elements of the marketing mix to achieve marketing objectives with available resources.

Legal Controls on Marketing

Laws regulating business activities to protect customers from harm, prevent misleading advertising, and ensure fair competition.

Entering Foreign Markets

Advantages and disadvantages of expanding into international markets, including barriers like cultural, economic, social, and legal differences.

Joint ventures

Agreement between 2 or more businesses to work together on a product → foreign firm will work w/domestic firm in same industry

Advantages of Joint Ventures

Reduces risk, cuts cost, each business brings different expertise, market potential for all businesses is increased, market + product knowledge can be shared for the benefit of both businesses in the joint venture

Disadvantages of Joint Ventures

Mistakes reflect on all firms, can damage reputation, decision-making process inefficient due to different business cultures/styles of leadership

Infrastructure

Basic facilities, services, and installations for a business to function (water, power, transport links)

Government Incentives

Finance such as interest-free loans or grants provided to a business to help when locating in a country/area of a country

Factors affecting Location Decisions

Production Materials, Market, Raw Materials and Components, External Economies, Availability of Labor, Transport and Communication Infrastructure, Climate

Start Up Capital

Initial capital needed when starting a business

Working Capital

Finance needed by a business to pay day-to-day running expenses and short-term debts (current assets - current liabilities)

Non-Current Assets (Fixed Assets)

Resources owned by a business that will be used for a period longer than 1 year (e.g., building, machinery)

Capital Expenditure

Money spent on fixed assets

Fixed Asset

Tangible assets like machinery or equipment that a business owns for long-term use

Hire Purchase/Leasing

Methods to acquire assets without paying the full amount upfront

Debt Factoring

Selling accounts receivable to a third party at a discount for immediate cash

Overdrafts

Short-term borrowing where a bank allows the account holder to withdraw more money than available

Long Term

Financing options like debentures and share issues for extended periods

Short Term

Immediate financial solutions such as overdrafts for short durations

Cash Flow

Movement of money in and out of a business over a specific period

Cash Inflow

Money coming into the business from sales, debtors, loans, or investments

Cash Outflow

Money leaving the business for expenses like purchases, wages, or loan repayments

Profit vs

Profit includes all transactions, while cash flow focuses on actual cash movements

Net Cash Flow

Difference between cash inflow and outflow

Working Capital

Funds needed for day-to-day operations and short-term expenses

Liquid Assets

Assets that can be quickly converted into cash

Liquidity

Ability to pay off short-term debts

Income Statement

Financial report showing revenues, costs, and profits over a period

Gross Profit

Revenue minus the cost of goods sold

Retained Profit

Earnings kept by the business for reinvestment

Statement of Financial Position

Shows assets, liabilities, and equity at a specific date

Current Ratio

Ratio of current assets to current liabilities indicating liquidity

Return on Capital Employed (ROCE)

Profitability ratio showing profit earned per dollar invested

Low GDP

Refers to a situation with lower output, higher unemployment, and a reduced standard of living or wages. It is used to compare economic performance between different years or countries.

Business Cycle

Describes the natural fluctuation of an economy, including periods of growth, peak (boom), recession, and slump. It influences factors like GDP, unemployment, and inflation rates.

Taxes + Government Spending

Tools used by governments to achieve economic objectives such as GDP growth, balance of payments, low inflation, and low unemployment. They involve controlling interest rates, taxes, and fiscal policies.

Growth Rate

The rate at which an economy expands, aiming for sustainable growth to prevent high unemployment or economic instability.

Taxes

Levies imposed by the government to fund public services, with direct taxes on personal income and indirect taxes on goods and services. They impact disposable income and business profits.

Externalities

Effects of business activities on unrelated parties, including negative externalities (social costs) and positive externalities (social benefits). They are considered in cost-benefit analysis for decision-making.

Sustainable Development

Business practices that consider environmental, social, and economic impacts for long-term benefits. It involves using renewable energy, reducing waste, and ensuring fair treatment of stakeholders.

Globalization

The process of countries becoming interconnected through trade, leading to multinational companies operating in multiple countries. It involves trade blocs, advantages, and disadvantages for home and host countries.

Legal Controls

Regulations imposed by governments to limit negative environmental impacts of business activities, including punishments, taxes, standards, and incentives for sustainable practices.

Business Ethics

Standards of responsible behavior in business operations, balancing profit-making with ethical considerations. Unethical practices include insider trading, false advertising, and poor working conditions.

Multinational Company (MNC)

A globally recognized brand that operates in multiple countries to access bigger markets and benefit from lower production costs.